A holiday lull for house prices

22 August 2017
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The holiday season is in full swing, with the main indices reporting minor growth over the past month or, in the case of Rightmove, a drop in asking prices.

Annual house price growth also remains muted, with Halifax and Nationwide reporting growth over the year to July of just 2.1% and 2.9% respectively.

While household budgets are being stretched and political uncertainty takes its toll on the market, a shortage of properties means that annual house price growth is still going up, albeit at a slower pace.

On a more positive note, Rightmove reports that homeowners in the English counties have enjoyed a mini-boom.

Key stats at a glance

  • UK House Price Index for June 2017: House prices up by 4.9% annually. Average price of a UK property: £223,257. Monthly change: +0.8%.
  • Halifax House Price Index, July 2017: House prices up by 2.1% annually. Average price of a UK property: £219,266. Monthly change: +0.4%.
  • Nationwide House Price Index, July 2017: House prices up by 2.9% annually. Average price of a UK property: 211,671. Monthly change: +0.3%.
  • Rightmove House Price Index, August 2017: Asking prices up by 3.1% annually. Average asking price of a UK property: £316,663. Monthly change: -0.9%.

Note: See the methodology for how the data for each index is calculated.

The latest figures from the UK House Price Index (UK HPI) for June show an annual price rise of 4.9% over the year, putting the average property in the UK at £223,257.

In England, prices have risen by 5.2%, with a monthly price rise of 0.8%, and an average price property at £240,325.

In Wales, annual price growth has slowed down to 3.6%, compared with last month’s 4.2% annual increase, with an average property price of £151,672. Since May, house prices have risen by 2.9%.

London continues to see a slowdown in house price growth, with property prices up by just 2.9% over the year, with an average price of £481,556 – compared with £481,345 in May. London was the only area to experience a monthly drop in prices – down by 0.7% since May.

Reflecting a similar picture to last month, the East of England experienced the highest annual growth – with property prices up by 7.2%.

10 years on from the credit crunch

Commenting on the UK HPI, Richard Snook, senior economist at PwC, reflects on the fact that this month marks the 10-year anniversary of the credit crunch.

He points out that house prices in Scotland and Wales are only just returning to their pre-recession peak levels.

“Wales surpassed the October 2007 peak of £150,000 for the first time this month, reaching £152,000, while in Scotland prices remain just below the May 2008 peak of £146,000 at £144,000 in June 2017,” he says.

“Prices in Northern Ireland remain around 40% below their pre-recession peak at £129,000 in June 2017. They had reached £225,000 in September 2007 having been caught up in the wider property bubble.”

He says that only England has bounced back since the global credit crisis.

“England is the only part of the UK where prices now significantly surpass their previous peak, with average house prices having risen from £195,000 in September 2007 to £238,000 today,” he adds.

Housing shortage ‘is an issue for buyers’

Halifax reveals that between May and July, house prices were 2.1% higher than in the same period in 2016. However, they were 0.2% lower than in the previous three months. It points out that this is the fourth successive quarterly fall – the first time this has happened since November 2012.

Russell Galley, managing director of Halifax Community Bank, says that house prices continue to remain “broadly flat”, pointing out that the annual rate of growth has dropped from 5.7% in January to 2.1% in July – the lowest rate since April 2013.  

He adds that a squeeze on spending power, together with the impact of the stamp duty changes in 2016 and affordability concerns, appear to have contributed to “weaker housing demand”, but that property prices will continue to be supported by a low mortgage rate environment and a shortage of properties.

Mark Harris, chief executive of mortgage broker SPF Private Clients, agrees, but says that finding a mortgage is less of a problem than finding a property.

“One of the big issues facing prospective buyers is not so much getting the mortgage they need but finding a property they wish to buy. Until supply improves, this will continue to be the case,” he says.

Market remains ‘subdued’

Nationwide reports an annual house price growth of 2.9% and house prices rising by 0.3% over the month to July – broadly the same as June.

Robert Gardner, Nationwide's chief economist, comments: “On the surface, this appears at odds with recent signs of cooling in the housing market. The number of housing transactions dipped to their lowest level for eight months in June, while in the same month the number of mortgages approved for house purchase moderated to a nine-month low of around 65,000,” he says. 

Like other property experts, Mr Gardner suggests that a shortage of homes is helping to keep house prices stable.

He adds: “Survey data points to relatively sluggish levels of new buyer enquiries, but at the same time surveyors report that relatively few properties are coming on to the market (and at a time when the number of homes on estate agents’ books is already close to 30-year lows).

“While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living. 

“This suggests that housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.”

Jonathan Samuels, chief executive of specialist property lender Octane Capital, comments: “Weak supply has once again ridden to the rescue of house prices.

"While demand is down at a time of economic and political uncertainty, the shortage of homes, both for sale and being built, is preventing prices from falling sharply.”

Mid-county hot spots perform well

Rightmove has seen asking prices drop by 0.9% in August – a fall of £2,758, but it points out that is not unusual during the summer holiday season.

Miles Shipside, Rightmove’s director and housing market analyst, says: “A combination of traditional summertime price blues and the chill of uncertainty in the air has cooled price growth in some parts of the country, and affordability also remains very stretched.”

However, the online portal reports that homeowners in counties in the middle of England have seen property prices outperform the rest of the UK.

The top eight county hot spots, with price rises more than double the national average over the past year, are Leicestershire (+6.9%), West Midlands (+6.9%), Worcestershire (+7%), Bedfordshire (+7%), Nottinghamshire (+7.1%), Norfolk (+7.4%), Derbyshire (+7.9%) and Northamptonshire (+9.1%).

Mr Shipside adds: “Buyers are becoming increasingly adept at hunting down property that fits their budget, ticks the boxes on their checklist and stirs their emotions. Properties in the counties that have seen above-average price rises over the past year are clearly meeting the needs of home hunters at relatively affordable prices.”

METHODOLOGY

Halifax House Price Index – This UK-wide index is based on the house purchase price at the mortgage approval stage. It calculates the annual change as an average for the latest three months compared with the same period a year earlier as it says its figures provide a better picture of the underlying trend compared to a monthly year-on-year number as they smooth out any short-term fluctuations.

Nationwide House Price Index – The data for this index for the whole of the UK is drawn from Nationwide’s house purchase mortgage lending at the post-survey approvals stage.

Rightmove House Price Index – The data is compiled from the asking prices of properties when they first come on to the market via over 13,000 estate agency branches listing on Rightmove.co.uk. The sample includes up to 200,000 homes each month – representing circa 90% of the market.

UK House Price Index – The UK HPI uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office of National Statistics.

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